How to Win the War in Afghanistan

Today, after years of foreign involvement in Afghanistan, unemployment is still 40 per cent and more than half the population lives below the poverty line. The current poor economic circumstances, while better than those under the Taliban, are a key impediment to success for the coalition. That is why it is critical that at the Afghan donors' conference in London to Thursday, the international community commits to revitalising Afghanistan's economy. If it does not, the military effort in the country is doomed to fail.

I applaud President Barack Obama's decision to stick with and adjust the military effort in Afghanistan. The US administration also deserves credit for recognising that more must be done on the civilian and economic fronts. However, a detailed strategy for the civilian side has yet to crystallise.

As the US develops such a strategy, it should consider one step that would significantly strengthen the Afghan economy: instructing the Pentagon, state department and USAID to use their purchasing power to encourage Afghan businesses. This is what we did in Korea and Japan. Many successful companies in both countries started out providing for US forces.

When I was US ambassador to Afghanistan from 2003 to 2005, virtually every bottle of water, slice of bread and piece of paper that the US embassy and military forces needed was imported at great cost to US taxpayers. Since then, some progress has been made. But still only a fraction of what our forces spend on food, construction materials and other basic goods goes to Afghan companies.

More Afghans are employed in agriculture than any other sector, so purchasing agricultural products locally is an effective and immediate path to increasing prosperity. It also reduces the attractiveness of the illegal opium market, which is currently one of the largest sources of income for farmers.

Foreign companies also provide most basic services to US and allied forces, from logistics and cafeteria management to laundry and air services. The hiring of foreign labour can be appropriate where Afghanistan lacks certain specialised skills. The hiring of unskilled foreign labour, however, is unjustified and wasteful. It contributes to unemployment and sparks resentment among Afghans.

There has been progress over the past few years with the creation of the Afghan First programme, which encourages contracting officers to favour Afghan vendors. This is a good start but there is room for improvement, most notably by more directly prioritising local sourcing and establishing clear written guidelines.

In addition, we should strengthen the Afghan credit market. Afghan small and medium-sized enterprises are starved of capital. The Overseas Private Investment Corporation and other parts of the US government have begun to promote Afghan investment funds, leasing, micro-finance and SME-financing companies, but must find additional ways to provide credit to Afghan entrepreneurs.

Improving Afghan economic capability as we improve Afghan security capability is vital. With the latter, we strengthen the government of Afghanistan. With the former, we can put young Afghans to work and create the basis for Afghan self-reliance.

This approach can work. It has worked in the beverage industry. From 2001 to 2003, the US spent roughly $60m a year on imported bottled water for its forces. In 2003-04, a number of water bottling and soda production businesses were successfully established in Afghanistan. Now, the US buys these products locally. There is no reason why similar success cannot be achieved in food, construction materials and services.

Ensuring security, quality and reliability are legitimate concerns. But they are manageable. Channelling US funds to Afghan business will lead to some distortions in the Afghan economy, assuming US forces eventually depart, but these can be overcome if US funds are strategically targeted at sectors where robust domestic and regional demand also exists.

The key to success is empowering Afghanistan's economy and improving the lives of its people. The approach proposed here does not burden American taxpayers with significant new costs. The question is not whether we should spend a lot more, but how we spend the resources we are committing in Afghanistan.

The writer, former US ambassador to Afghanistan, Iraq and the UN, is a counsellor at the Centre for Strategic and International Studies and president and CEO of Khalilzad Associates

Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.